This report can be found on MBP's...

This report can be found on MBP's website:
http://www.metabolic.com.au/

It is worthwhile reading and my summary to follow cannot replace the contents of that excellent report.
_______________________________

"In the United States, the Centers for Disease Control (CDC) estimated that 31% of U.S. adults aged 20 years and older—nearly 59 million people—were obese in 1999-2000. conditions including type 2 diabetes, hypertension, lipid disorders, coronary heart disease, stroke, colon cancer, post menopausal breast cancer, endometrial cancer, gall bladder-disease, osteoarthritis, respiratory problems, and sleep apnea.

The health costs of obese individuals are about 77% higher than normal, which is much higher even than the 28% increase attributed to smoking.

A U.S. study of national expenditures attributed to both overweight and obesity found that actual medical expenses accounted for 9.1 percent of total U.S. medical expenditures in 1998 and may have reached as high as $78.5 billion ($92.6 billion in 2002 dollars) (Finkelstein, Fiebelkorn, and Wang, 2003).

Obeisity is a disease that causes over 300,000 deaths in the US. According to the American Obesity Association (AOA), healthcare costs for obesity are approximately $100 billion annually.

Appetite suppressants, which act on the central nervous system, are currently the standard pharmaceutical treatment for obesity. Typical side effects are mood elevation, wakefulness, and increased blood pressure.

There are other drugs. Digestion modifiers are a newer class of drug that interferes with digestion: they reduce energy intake by inhibiting the action of enzymes that break down fat in the gut. Xenical (Roche), the first drug in this class, is available in Europe and the United States.

Metabolic believes that AOD9604 drug will provide a more specific and, therefore, safer and more effective pharmaceutical treatment to fight the epidemic of obesity than any prior agent or other classes of obesity drugs: Mechanism of action: AOD9604 acts directly on fat cells to release and burn stored fat and reduce stored fat.

With Phase 3 scheduled to begin in 2005, we believe the NDA filing with the FDA will occur in 2006 with approval in 2007. Pharmaceutical firms interested in Metabolic’s obesity therapy may desire additional data from the Phase 2 trial, which should be complete towards the end of calendar year 2004.

Due to the implications such a drug may have on reducing healthcare costs, the FDA may ‘fast track’ the approval process.

This current clinical trial is expected to be complete in September 2004 with results available in late November 2004.

The Notice of Allowance will result in a new patent will extend the original patents that had expiration dates of 2014 and 2016, to September 2018 and extend the coverage to apply to any commercialization of the obesity compound.

Large multinational pharmaceutical companies can not afford to ignore the blockbuster potential of a new drug that addresses a growing health problem.

If only 10% of the potential US market prescribes the drug, it can produce revenues of over $9 billion annually. Final FDA filing for a new drug can take place during the end of the Phase III clinical trials.

We expect FDA approval will occur in FY08. Due to the uniqueness of the obesity drug in that it addresses a disease that is inadequately addressed today, we believe there is a high probability that the FDA may fast-track approval of Metabolic’s obesity drug.

If this were to happen, FDA approval may come as early as the end of FY07. (Comment: I do believe the drug will be on the market earlier than 2008).

For the royalty, we conservatively forecast a 15% royalty to Metabolic for the obesity drug. We believe the royalty payments may be as high as 25% and patient cost could be significantly higher.
______________________________

Comment:
There are a number of positives, provided the results from Phase II will be satisfactory:
1. The drug is unique.
2. Obesity healthcare costs are astronomical.
3. The market is massive.
4. A potential blockbuster could attract Pharmas.
5. The FDA is very much interested in the outcome.

Cohen set 3 intermediate price targets: $2.29 for the pessimistic scenario, $3.55 for the base scenario and $4.67 for the optimistic one.

I prefer the Base Scenario ($3.55 price target).

Gerry
Readers, please do your own research and you decide if and when to buy, hold or sell any stocks.